M/s.. Upkar International (P) Ltd., New Delhi V. DCIT, New Delhi

ITA 6710/DEL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7570 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 17-05-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 20-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: J S KOCHAR; UDAI BIR SINGH KOCHAR ADVS
• Keywords: Depreciation; Search and seizure; Tangible material; Wrong claim; Difference of opinion; Revised return; Reason to believe; Change of opinion
• Section: 143(3); 115JB; 80IB; 147; 148; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NO. 6710 /DEL/2013 A.Y. : 200 3 - 0 4 UPKAR INTERNATIONAL (P) LTD., C/O J.S. KOCHAR & ASSOCIATES, 209, SEWAK BHAWAN, 16/2, WEA KAROL BAGH, NEW DELHI 110 005 VS. DCIT, CIRCLE 18(1), CR BUILDING, I.P. ESTATE, NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. J.S. KOCHAR & SH. UDAI BIR SINGH KOCHAR, ADVS. DEPARTMENT BY : SH. AMIT JAIN, SR. DR DATE OF HEARING : 18-05-2016 DATE OF ORDER : 02-06-2016 ORDER PER H.S. SIDHU, JM ASSESSEE HAS FILED THIS APPEAL AGAINST THE ORDER D ATED 08.10.2013 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXI, NEW DELHI PERTAINING TO ASSESSMENT Y EARS 2003-04 ON THE FOLLOWING GROUNDS:- 1. THAT THE LEARNED CIT (APPEALS) ERRED IN UPHOLDI NG THE VALIDITY OF REOPENING HE ASSESSMENT MADE U/S 14 3(3) ITA NO. 6710/DEL/2013 A.Y. 2003-04 2 OF THE I T ACT, SIMPLY BECAUSE REASONS HAD BEEN REC ORDED BY THE AO, IGNORING THE FACT THAT THERE WAS NO INCO ME THAT HAD ESCAPED ASSESSMENT. THE DISALLOWANCE OF RS.10,13,828 U/S 801B OF THE I T ACT SOUGHT TO BE M ADE BY REOPENING THE ASSESSMENT, HAD ALREADY BEEN MADE IN THE ORIGINAL ASSESSMENT. 2. THAT THE LEARNED CIT (APPEALS) ERRED M UPHOLD ING THE REOPENING OF THE ASSESSMENT WHEN THE REVENUE'S APPE AL AGAINST THE ORDER U/ S 143(3) ON THE VERY ISSUE OF DEDUCTION 1/ S 801B WAS PENDING BEFORE THE HON'BLE ITAT. 3. THAT THE LEARNED CIT(A) ERRED IN OVERLO OKING THE FACT THAT IN THE ORIGINAL ASSESSMENT, THE ISSUE OF DEDUC TION U/S 801B OF THE I T ACT HAD BEEN SPECIFICALLY EXAMI NED AND DISCUSSED AND IN FACT THE DEDUCTION WAS DISALLO WED AND THUS THE REOPENING WAS ON ACCOUNT OF A MERE CHANGE IN OPINION AND A REVIEW OF THE ORIGINAL ASSESSMENT WAS SOUGHT TO BE MADE IN THE GUISE OF REASSESSMENT. 4. THAT THE ASSESSMENT ORDER U/S 147/143(3) OF THE INCOME TAX ACT IS BAD IN LAW AS THE INITIATION OF PROCEEDI NGS U/S. 147 ITSELF WAS INVALID. ITA NO. 6710/DEL/2013 A.Y. 2003-04 3 5. THAT IN THE- FACTS AND CIRCUMSTANCES OF THE CASE , THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF DEDUCTION OF RS.10,13,238/- U/S. 80-IB OF THE IT ACT. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED A RETURN DECLARING INCOME OF RS. 6,76,085/- AND BOOK PROFIT U/S. 115JB AMOUNTING TO RS. 47,95,793/- ON 2.12.2003. THE ASS ESSEE FILED A REVISED RETURN ON 25.11.2004 REDUCING THE BOOK PRO FIT TAXABLE U/S. 115JB TO THE TUNE OF RS. 24,30,393/-. THE ASSESSEE HAD CLAIMED THE DEDUCTION U/S. 80IB OF RS. 10,13,828/- FROM THE EXPORTS INCENTIVES LIKE DUTY DRAWBACK ETC. THE AO EXAMINED THE ISSUE REGARDING THE ELIGIBILITY OF EXPORTS INCENTIVES AS DEDUCTION U/S. 80IB AND HAD MADE A DETAILED NOTE DATED 26.3.2008 AND HA S RECORDED THE REASONS THAT THE ASSESSEE HAS CLAIMED THE WRONG DEDUCTION AND AS SUCH THE INCOME HAS ESCAPED ASSESSMENT. ACCORD INGLY, THE AO COMPLETED THE ASSESSMENT AT AN INCOME OF RS. 20,64, 503/- U/S. 147/143(3) OF THE I.T. ACT, 1961 ON 30.10.2008. . 3. AGAINST THE ORDER OF THE LD. AO, ASSESSEE APPEA LED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 08.10.20 13 HAS DISMISSED THE APPEAL OF THE ASSESSEE. 4. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. ITA NO. 6710/DEL/2013 A.Y. 2003-04 4 5. AT THE TIME OF HEARING, LD. COUNSEL OF THE ASSES SEE LD. COUNSEL OF THE ASSESSEE HAS ONLY ARGUED ON THE LEGA L ISSUE I.E. ABOUT THE VALIDITY OF THE REOPENING. IN THIS CONNEC TION, HE STATED THAT THE DEDUCTION U/S 80-IB AMOUNTING TO RS. 10,13 ,828/- HAD BEEN DISALLOWED IN THE ORIGINAL ASSESSMENT ITSELF. THUS THERE WAS NO INCOME WHICH ESCAPED ASSESSMENT. LD. COUNSEL OF TH E ASSESSEE FURTHER STATED THAT IN THE ORIGINAL ASSESSMENT, TH E AO HAD NOT JUST FORMED AN OPINION IN RESPECT OF THE DEDUCTION U/S 8 0-IB CLAIMED BY THE ASSESSEE BUT HAD ACTUALLY DISALLOWED THE SAME. MOREOVER, THE ASSESSEE HAD DISCLOSED EXPORT INCENTIVES IN ITS PRO FIT & LOSS A/C, WHICH FORMED THE BASIS OF THE COMPUTATION OF ITS T OTAL INCOME IN THE ORIGINAL ASSESSMENT. THE AO IN THE REASONS RECO RDED HAS REFERRED TO THE RECORD AS WELL AS CASE LAWS THAT WE RE ALREADY AVAILABLE AT THE TIME OF ORIGINAL ASSESSMENT. HENCE , NO FRESH OR TANGIBLE MATERIAL CAME INTO THE HANDS OF THE AO WHE N REASONS WERE RECORDED AND IT IS A CASE OF CHANGE OF OPINION, WH ICH IS NOT PERMISSIBLE IN VIEW OF THE LAW SETTLED BY THE FOLL OWING DECISIONS AND THEREFORE, THE REASSESSMENT NEEDS TO BE QUASHED. (A) CIT VS. KELVINATOR OF INDIA LTD. (2010) 320 ITR 561 (SC) (B) CIT VS CENTRAL WAREHOUSING CORPORATION (2015) 3 71 ITR 81 DEL) (C) VODAFONE SOUTH LTD. VS UNION OF INDIA (2014) 36 3 ITR 388 (DEL) (D) MADHUKAR KHOSLA VS ACIT (2014) 367 ITR 165 (DEL ) ITA NO. 6710/DEL/2013 A.Y. 2003-04 5 (E) BLB LTD. VS ACIT (2012) 343 ITR 129 (DEL) 6. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER OF THE LD. CIT(A) AND STATED THAT LOWER AUTHORITIES HAVE HAVE PASSED A WELL REASONED ORDER ON THE BASIS OF THE DOCUMENTARY EVID ENCES FILED BY THE ASSESSEE AS WELL AS PREVAILING LAW. HE FURTHER STATED THAT NOTICE U/S. 148 HAS BEEN ISSUED AFTER ADOPTING THE PRESCR IBED PROCEDURE UNDER THE LAW AND WITH TANGIBLE MATERIAL. THEREFOR E, HE STATED THAT THE QUESTION OF QUASHING THE REASSESSMENT DOES NOT ARISE. ACCORDINGLY, HE REQUESTED THAT THE APPEAL FILED BY THE ASSESSEE MAY BE DISMISSED. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS ESPECIALLY THE ORDERS OF THE REVENUE AUTHORITIES AL ONGWITH THE PAPER BOOK FILED BY THE ASSESSEE CONTAINING PAGES 1 TO 36 HAVING VARIOUS DOCUMENTARY EVIDENCES. WE HAVE ALSO PERUSED THE CASE LAWS CITED BY THE LD. COUNSEL OF THE ASSESSEE, AS A FORESAID. WE HAVE ALSO PERUSED THE REASONS RECORDED BY THE AO. FOR THE SAKE OF CLARITY, WE ARE REPRODUCING THE REASONS RECORDED BY THE AO AS UNDER:- UPKAR INTERNATIONAL LTD 26/03/08 ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE/ASSEMBLING OF DIESEL ENGINES. IN THE RE TURN ITA NO. 6710/DEL/2013 A.Y. 2003-04 6 OF INCOME ASSESSEE HAS WRONGLY CLAIMED DEDUCTION U/ S 80IB OF THE INCOME TAX ACT. IN THE ASSESSMENT YEAR 2005-06 TOO THE DEDUCTION CLAIMED UNDER SECTION 80L B HELD BY THE AO TO BE NOT ALLOWABLE 1. DEDUCTION U/S 80IB THE CASE OF THE ASSESSEE WAS COMPLETED U/S 143(3) F OR THE A YEAR 2003-04 AT RS. 20,64,503/- ON 07-03- 200.6. THE ASSESSEE HAS CLAIMED DEDUCTION OF RS. 10.13,828/- U/S. 80IB @25% OF THE ELIGIBLE PROFITS WHICH HAVE BEEN WORKED OUT AT RS. 40,55,313/-_ IN FORM NO . 3CCB DATED 1-8-2003 APPENDED TO THE RETURN OF INCOM E. PERUSAL OF THE DETAILS OF INCOME REVEAL THAT THE AS SESSEE HAS ALSO SHOWN OTHER INCOME WHICH HAS BEEN TAKEN FO R THE PURPOSE OF ELIGIBLE PROFITS. THE DETAILS OF THE OTHER INCOME ARE AS UNDER: A) OTHER INCOME COMPRISES OF THE FOLLOWING- I) BROKERAGE RS.69337 II) EXPORT INCENTIVES RS.4325443 III) PROFIT ON SALE OF FIXED ASSET RS.33874 IV) INTEREST ON FDR RS. 983 V) REBATE & DISCOUNT RS. 12240 VI) INCENTIVES RS.148115 ITA NO. 6710/DEL/2013 A.Y. 2003-04 7 BESIDES OTHER INCOMES LIKE BROKERAGE, REBATES ETC ., A SUM OFRS.43.25.443/- HAS BEEN SHOWN AS EXPORT INCENTIVES. THE EXPORT INCENTIVES RECEIVED BY THE ASSESSEE CANNOT BE SAID TO BE DERIVED FROM THE BUSI NESS OF INDUSTRIAL UNDERTAKING. THE BENEFIT OF DEDUCTIONS ULS 8018 IS PROVIDED ON THE PROFITS AND GAINS DERIVED FROM AN INDUSTRIAL UNDERTAKING AS SPECIFIED THEREIN. IT IS NOT AN OMN IBUS BENEFIT AVAILABLE TO THE ENTIRE INCOME OF THE ASSES SEE. THE TERM 'DERIVED FROM' USED IN THE SECTION CANNOT HAVE A WIDE IMPORT SO AS TO INCLUDE ANY INCOME WHICH CAN IN SOME MANNER BE ATTRIBUTABLE TO THE BUSINESS. THE DERIVAT ION OF INCOME MUST BE DIRECTLY CONNECTED WITH THE BUSINESS IN THE SENSE THAT THE INCOME IS GENERATED BY THE BUSIN ESS. IT WOULD NOT BE SUFFICIENT IF IT IS GENERATED BY TH E EXPLOITATION OF BUSINESS ASSETS. THE SOURCE OF A PA RTICULAR INCOME BY AN ASSESSEE FOR WHICH A REBATE IS SOUGHT FOR MUST HAVE DIRECTLY EMERGED FROM THE RUNNING OF THE INDUSTRIAL UNDERTAKING, YIELDING PROFITS AND GAINS. SUCH PROFITS MUST HAVE BEEN DERIVED FROM THE INDUSTRIAL UNDERTAKING WHICH MUST ITSELF BE THE SOURCE OF THAT PROFIT. ITA NO. 6710/DEL/2013 A.Y. 2003-04 8 THE LEGAL POSITION ON INTERPRETATION OF THE TERM 'DERIVED FROM' WAS SETTLED BY THE PRIVY COUNCIL IN THE CASE OF EN VS. RAJA BAHADUR KAMAKHYA NARAIN SINGH (1948) 16 ITR 325. IN THAT CASE IT WAS POINTED OUT THAT THE WORD 'DERIVED' IS HOT A TERM OF ART. ITS USE IN THE DEFINITION DEMANDED AN INQUIRY INTO THE GENEALOGY O F THE PRODUCT. THE QUESTION IN THAT CASE WAS WHETHER INTE REST IN RESPECT OF ARREARS OF RENT PAYABLE FOR LAND WHIC H WAS USED FOR AGRICULTURAL PURPOSES WOULD ALSO BE AGRICU LTURE. THE CLAIM ON BEHALF OF THE ASSESSEE WAS THAT SINC E THE RENT WAS PAYABLE FOR AGRICULTURAL LAND, THE INT EREST ON DELAYED PAYMENT OF SUCH RENT WAS ALSO OF AGRICULTUR AL CHARACTER AND WAS NOT TAXABLE. THE HON'BLE SUPREME COURT OF INDIA HAS BEEN FOLLOWING THE INTERPRETATION GIVEN BY THE PRIVY COU NCIL IN KAMAKHVA NARAIN SINGH'S CASE. IN THE CASE OF MRS. B ACHA F. GUZDAR {1955) 27 ITR 1, IT WAS HELD THAT WHERE A COMPANY-DERIVING INCOME FROM AGRICULTURE DECLARED DIVIDEND, THE DIVIDEND DID NOT ARISE FROM ANY AGRIC ULTURAL SOURCE AND CANNOT BE CLAIMED TO BE INCOME DERIVED F ROM AGRICULTURAL ACTIVITY IN HINDUSTAN LEVER LTD. VS. C IT (1997) 239 ITR 297, (SC) WHILE DISMISSING THE APPEA L ITA NO. 6710/DEL/2013 A.Y. 2003-04 9 HELD THAT THE HIGH COURT WAS CLEARLY RIGHT IN HOLDI NG THAT THE ASSESSEE'S PROFIT FROM SALE OF ITS GOODS IN IND IA CANNOT BE SAID TO HAVE BEEN DERIVED FROM EXPORT SAL ES. IN ENGLISH ELECTRIC COMPANY OF INDIA LTD. VS CIT 16 8 ITR 513 MADRAS HIGH COURT HAD HELD THAT WHERE THE INTER EST IS EARNED ON DEPOSITS KEPT IN NORMAL COURSE BY THE INDUSTRY, SUCH INCOME CANNOT BE SAID TO BE ATTRIBUT ABLE TO THE INDUSTRY- THE DISTINCTION BETWEEN 'DERIVED FROM' AND 'ATTRIB UTABLE TO', WHICH HAD BEEN EMPHASISED BY THE SUPREME COURT IN THE CASE OF CAMBAY ELECTRIC SUPPLY. INDUSTRIAL CO. LTD. V . CIT (1978], HAS BEEN REITERATED BY THE SUPREME CO URT IN ITS LATER RULING IN THE CASE OF CIT V STERLING F OODS [1999] WHICH REVERSED THE DECISION OF THE KARNATAKA HIGH COURT (STERLING FOODS V CIT[1991)), THE REASON ING GIVEN BY THE HONBLE SUPREME COURT IS REPRODUCED HEREUNDER:- 'THE SOURCE OF THE IMPORT ENTITLEMENTS CANNOT BE SAID TO BE THE INDUSTRIAL UNDERTAKING OF THE ASSESSEE. THE SOURCE OF THE IMPORT ENTITLEMENTS CAN, IN THE CIRCUMSTANCES, ONLY BE SAID TO BE THE EXPORT PROMOTION SCHEME OF THE CENTRAL ITA NO. 6710/DEL/2013 A.Y. 2003-04 10 GOVERNMENT WHERE UNDER THE EXPORT ENTITLEMENTS BECOME AVAILABLE. THERE MUST BE, FOR THE APPLICATION OF THE WORDS 'DERIVED FROM', A DIRECT NEXUS BETWEEN THE PROFITS AND GAINS AND THE INDUSTRIAL UNDERTAKING. IN THE INSTANT CASE, THE NEXUS IS NOT DIRECT BUT ONLY INCIDENTAL. THE INDUSTRIAL UNDERTAKING EXPORTS PROCESSED SEAFOOD. BY REASON OF SUCH EXPORT, THE EXPORT PROMOTION SCHEME APPLIES. THERE UNDER, THE ASSESSEE IS ENTITLED TO IMPORT ENTITLEMENTS, WHICH IT. CAN SELL . THE SALE CONSIDERATION THERE FROM CANNOT BE HELD TO CONSTITUTE A PROFIT AND GAIN DERIVED FROM THE ASSESSEE'S INDUSTRIAL UNDERTAKING.' IT IS CLEAR THAT IN ORDER TO DETERMINE WHETHER AN INCOME. CAN BE SAID TO BE DERIVED' FROM AN INDUSTRIAL UNDERTAKING AN ENQUIRY SHOULD BE MADE INTO THE SOUR CE OF THE INCOME AND THE ENQUIRY SHOULD END AT THE FIR ST STEP OTHERWISE ENQUIRY WILL ULTIMATE LEAD TO BUSINESS CONNECTION IN EVERY CASE. FOR INSTANCE IN THE CASE OF STERLING FOOD LTD THE ENQUIRY ENDED AT THE SCHEME OF THE GOVT. FOR DUTY DRAW BACK AND DID NOT CONTINUE T O REACH THE FACT THAT DDBK AROSE OUT OF THE. EXPORTS MADE ITA NO. 6710/DEL/2013 A.Y. 2003-04 11 BY THE ASSESSEE. IN THE CASE OF PANDIAN CHEMICAL L TD. VS. CIT (2003) 262 ITR 278 (SC) THE HON'BLE SUPREME COURT HELD THAT INTEREST ON DEPOSIT WITH ELECTRICITY BOARD IS NOT DERIVED FROM INDUSTRIAL UNDERTAKING AS IT WAS A STEP REMOVED FROM THE BUSIN ESS OF INDUSTRIAL UNDERTAKING. THUS IN ORDER TO QUALIFY FOR DEDUCTION U/S 80-LB TH E INCOME SHOULD QUALIFY THE ABOVE TEST OF BEING BORN OUT OF IMMEDIATE SOURCE OF MANUFACTURE. THE JURISDICTIONAL HIGH COURT IN THE CASE OF RITESH INDUSTRIES LTD 274 ITR 324 HELD THAT DUTY DRAW BACK CANNOT BE REGARDED AS THE PROFIT OR GAIN 'DERIVED' FROM INDUSTRIAL UNDERTAKING. IT MAY CONSTITUTE PROFIT OR GAIN OF THE BUSINESS BY VIRTUE OF SECTION 28 BUT IT CANNOT BE CONSTRUCTED AS PROFIT OR GAINS DERIVED FROM INDUSTR IAL UNDERTAKING, SINCE ITS 'IMMEDIATE AND OROXIMATE SOU RCE IS NOT THE INDUSTRIAL UNDERTAKING BUT THE SCHEME OF DUTY DRAW BACK. THE JUDGMENT IN THIS CASE ALSO REFERRED WAS THE DECISION OF APEX COURT IN THE CASE OF STERLING FOOD 237 ITR 579. THE VERDICT OF HON'BLE SUPREME COURT IS LAW OF THE LAND AND IS EQUAL TO THE STATUE BOOK, ALSO IT SHOUL D HAVE ITA NO. 6710/DEL/2013 A.Y. 2003-04 12 BEEN FOLLOWED BY THE ASSESSEE IN LETTER AND SPIRIT. IN VIEW OF ABOVE FACTS I HAVE REASON TO BELIEVE THAT INCOM E TO THE TUNE OF RS, 10,13,8281/- ARISING OUT OF WRONG C LAIM OF DEDUCTION ULS 80IB HAS ESCAPED ASSESSMENT. THE COMPONENTS OF THE INCOME THAT ESCAPED ARE GIVEN IN LEA) ABOVE. IN OTHER WORDS THE ESCAPED INCOME WAS ALSO D UE TO A WRONG ACT ON THE PART OF THE ASSESSEE TO CORRE CTLY CLAIM DEDUCTION ULS 80IB. IN THE CIRCUMSTANCES OF T HE CASE TO BRING THE ESCAPED INCOME TO TAX PROVISIONS AS CONTAINED IN SECTION 147 READ WITH EXPLANATION 2 AR E CLEARLY ATTRACTED. THE FACTS EXPLAINED ABOVE SHOWS THE CIRCUMSTANCES LEADING TO THE WRONG CLAIM UNDER SECTION 80IB MADE BY THE ASSESSEE AND THE FACTS INDICATING THAT THERE WA S FAILURE ON THE PART OF THE ASSESSEE TO COMPLY WITH THE PROVISIONS OF INCOME TAX ACT AND ALSO THE LAW ENUNC IATED BY THE HON'BLE SUPREME COURT FOR THESE SECTIONS ARE FULLY DISCUSSED ABOVE. IN THE CIRCUMSTANCES OF THE CASE PROVISIONS AS CONTAINED IN SECTION 147 READ WITH EXPLANATION 2 AR E CLEARLY ATTRACTED. AS 4 YEARS HAVE NOT ELAPSED FROM THE END OF THE RELEVANT ASSESSMENT YEAR THE POWER OF IS SUING ITA NO. 6710/DEL/2013 A.Y. 2003-04 13 RESTS WITH THE DCIT, HENCE NO PERMISSION IS REQUIRE D FROM LD. COMMISSIONER OF INCOME TAX/ADDL. COMMISSIONER OF INCOME TAX, NEW DELHI AS MENTIONED IN SECTION 1 51( I) OF THE L TAX ACT, 1961. THEREFORE, ON THE ABOVE REASONS I AM SATISFIED THAT INCOME TO THE TUNE OF RS. 10,13,828/- HAS ESCAPED ASSESSMENT WITHIN MEANING O F SECTION 147 OF THE INCOME TAX ACT. ISSUE NOTICE ULS 148 OF THE INCOME TAX ACT FOR INCOME ESCAPING TAX. SD/- (VIRENDER SINGH) DY. COMMISSIONER OF INCOME TAX CIRCLE-I8(L), NEW DELHI 7.1 AFTER GOING THROUGH ALL THE RECORDS AVAILABLE WITH US, WE FIND THAT THE ORIGINAL ASSESSMENT WAS MADE BY THE AO U/ S 143(3) ON 07/03/2006 AND THE REASONS RECORDED ON 26/03/2008, THERE IS NOT EVEN A WHISPER OF THE ORIGINAL ASSESSMENT ORDER AND THE DISALLOWANCES MADE THEREIN. WE ALSO NOTE THAT THE D EDUCTION U/S 80-IB AMOUNTING TO RS. 10,13,828/- HAD BEEN DISALL OWED IN THE ORIGINAL ASSESSMENT ITSELF. AS PER THE REASONS REC ORDED U/S. 148, THE REOPENING WAS MADE TO DISALLOW THE SAME DEDUCTI ON OF RS. ITA NO. 6710/DEL/2013 A.Y. 2003-04 14 10,13,828/- U/S. 80IB WHICH HAD ALREADY BEEN DISAL LOWED IN THE ORIGINAL ASSESSMENT. THUS, THERE WAS NO INCOME WHIC H IS ESCAPED ASSESSMENT. THIS IS ALSO EVIDENT FROM THE FACT THAT THE TOTAL INCOME DETERMINED IN THE ORIGINAL ASSESSMENT AS WELL AS TH E REASSESSMENT IS THE SAME I.E. RS. 20,64,503/-. IT IS A SETTLED LAW THAT IN THE ABSENCE OF ANY INCOME ESCAPING ASSESSMENT, NO REASS ESSMENT CAN BE MADE. 7.2 WE FURTHER FIND THAT IN THIS CASE THE REASSESSM ENT SEEKS TO REVIEW THE ORIGINAL ASSESSMENT WITHOUT ANY FRESH OR TANGIBLE MATERIAL AND WAS ACTUATED BY CHANGE OF OPINION IN T HE ORIGINAL ASSESSMENT, THE AO HAD NOT JUST FORMED AN OPINION I N RESPECT OF THE DEDUCTION U/S 80-IB CLAIMED BY THE ASSESSEE BUT HAD ACTUALLY DISALLOWED THE SAME. MOREOVER, THE ASSESSEE HAD DIS CLOSED EXPORT INCENTIVES IN ITS PROFIT & LOSS A/C, WHICH FORMED T HE BASIS OF THE COMPUTATION OF ITS TOTAL INCOME IN THE ORIGINAL AS SESSMENT. WE NOTE THAT THE AO IN THE REASONS RECORDED HAS REFERR ED TO THE RECORD AS WELL AS CASE LAWS WHICH WERE ALREADY AVAILABLE A T THE TIME OF ORIGINAL ASSESSMENT. NO FRESH OR TANGIBLE MATERIAL CAME INTO THE HANDS OF THE AO WHEN REASONS WERE RECORDED. IN THE CIRCUMSTANCES, THE REOPENING WAS SOUGHT TO BE MADE ONLY TO REVIEW THE ORIGINAL ASSESSMENT WHICH WAS ACTUATED BY CHANGE OF OPINION BY THE AO, WHICH IS CLEARLY IMPERMISSIBLE IN VIEW OF THE LAW S ETTLED BY THE ITA NO. 6710/DEL/2013 A.Y. 2003-04 15 HONBLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. (2010) 320 ITR 561 (SC). THE HONBLE A PEX COURT IN THE AFORESAID CASE HAS ANALYSED IN DETAIL THE PROVISION S OF SECTION 147 OF THE IT ACT AND HELD AS UNDER:- AFTER THE AMENDING ACT, 1989, SECTION 147 READS AS UNDER: INCOME ESCAPING ASSESSMENT - 147. IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT ANY INCOME CHARG EABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YE AR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 T O 153, ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSME NT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE C OURSE OF THE PROCEEDINGS UNDER THIS SECTION, OR RECOMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESSMENT Y EAR CONCERNED (HEREAFTER IN THIS SECTION AND IN SECTION S 148 TO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR) . 4. ON GOING THROUGH THE CHANGES, QUOTED ABOVE, MADE TO SECTION 147 OF THE ACT, WE FIND THAT, PRIOR TO DIRECT TAX LAWS (AMENDMENT) ACT, 1987, RE-OPENING ITA NO. 6710/DEL/2013 A.Y. 2003-04 16 COULD BE DONE UNDER ABOVE TWO CONDITIONS AND FULFIL LMENT OF THE SAID CONDITIONS ALONE CONFERRED JURISDICTION ON THE ASSESSING OFFICER TO MAKE A BACK ASSESSMENT, BUT IN SECTION 147 OF THE ACT [WITH EFFECT FROM 1ST APRIL, 1989], THEY ARE GIVEN A GO-BY AND ONLY ONE CONDITION HAS REMAINED, VIZ., THAT WHERE THE ASSESSING OFFICER H AS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMEN T, CONFERS JURISDICTION TO REOPEN THE ASSESSMENT. THER EFORE, POST-1ST APRIL, 1989, POWER TO RE-OPEN IS MUCH WIDE R. HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATI ON TO THE WORDS REASON TO BELIEVE FAILING WHICH, WE ARE AFRAID, SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO RE-OPEN ASSESSMENTS ON THE BAS IS OF MERE CHANGE OF OPINION, WHICH CANNOT BE PER SE RE ASON TO RE-OPEN. WE MUST ALSO KEEP IN MIND THE CONCEPTUA L DIFFERENCE BETWEEN POWER TO REVIEW AND POWER TO RE- ASSESS. THE ASSESSING OFFICER HAS NO POWER TO REVIE W; HE HAS THE POWER TO RE-ASSESS. BUT RE-ASSESSMENT HAS T O BE BASED ON FULFILLMENT OF CERTAIN PRE-CONDITION AND I F THE CONCEPT OF CHANGE OF OPINION IS REMOVED, AS CONTE NDED ON BEHALF OF THE DEPARTMENT, THEN, IN THE GARB OF R E- OPENING THE ASSESSMENT, REVIEW WOULD TAKE PLACE. ON E ITA NO. 6710/DEL/2013 A.Y. 2003-04 17 MUST TREAT THE CONCEPT OF CHANGE OF OPINION AS AN IN- BUILT TEST TO CHECK ABUSE OF POWER BY THE ASSESSING OFFICER. HENCE, AFTER 1ST APRIL, 1989, ASSESSING OF FICER HAS POWER TO RE-OPEN, PROVIDED THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF. OUR VIEW GETS SUPPORT FROM THE CHANGES MADE TO SECTION 147 O F THE ACT, AS QUOTED HEREINABOVE. UNDER THE DIRECT TA X LAWS (AMENDMENT) ACT, 1987, PARLIAMENT NOT ONLY DELETED THE WORDS REASON TO BELIEVE BUT ALSO INSE RTED THE WORD OPINION IN SECTION 147 OF THE ACT. HOWEV ER, ON RECEIPT OF REPRESENTATIONS FROM THE COMPANIES AG AINST OMISSION OF THE WORDS REASON TO BELIEVE, PARLIAM ENT RE-INTRODUCED THE SAID EXPRESSION AND DELETED THE W ORD OPINION ON THE GROUND THAT IT WOULD VEST ARBITRAR Y POWERS IN THE ASSESSING OFFICER. WE QUOTE HEREINBEL OW THE RELEVANT PORTION OF CIRCULAR NO.549 DATED 31ST OCTOBER, 1989, WHICH READS AS FOLLOWS: 7.2 AMENDMENT MADE BY THE AMENDING ACT, 1989, TO REINTRODUCE THE EXPRESSION `REASON TO ITA NO. 6710/DEL/2013 A.Y. 2003-04 18 BELIEVE' IN SECTION 147. A NUMBER OF REPRESENTATIONS WERE RECEIVED AGAINST THE OMISSION OF THE WORDS `REASON TO BELIEVE' FROM SECTION 147 AND THEIR SUBSTITUTION BY THE `OPINION' OF THE ASSESSING OFFICER. IT WAS POINTED OUT THAT THE MEANING OF THE EXPRESSION, `REASON TO BELIEVE' HAD BEEN EXPLAINED IN A NUMBER OF COURT RULINGS IN THE PAST AND WAS WELL SETTLED AND ITS OMISSION FROM SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO REOPEN PAST ASSESSMENTS ON MERE CHANGE OF OPINION. TO ALLAY THESE FEARS, THE AMENDING ACT, 1989, HAS AGAIN AMENDED SECTION 147 TO REINTRODUCE THE EXPRESSION `HAS REASON TO BELIEVE' IN PLACE OF THE WORDS `FOR REASONS TO BE RECORDED BY HIM IN WRITING, IS OF THE OPINION'. OTH ER PROVISIONS OF THE NEW SECTION 147, HOWEVER, REMAIN THE SAME. 5. FOR THE AFORE-STATED REASONS, WE SEE NO MERIT IN THESE CIVIL APPEALS FILED BY THE DEPARTMENT, HENCE, DISMISSED WITH NO ORDER AS TO COSTS. 7.3 IN VIEW OF THE AFORESAID FACTS AND CIRCUMSTANCE S, AS EXPLAINED ABOVE AND RESPECTFULLY FOLLOW THE LAW LAID DOWN BY THE HONBLE ITA NO. 6710/DEL/2013 A.Y. 2003-04 19 SUPREME COURT OF INDIA IN THE CASE OF CIT VS. KELVI NATOR OF INDIA LTD. (2010) 320 ITR 561 (SC), AS AFORESAID, WE ARE OF THE VIEW THAT BOTH THE AUTHORITIES BELOW HAVE GONE WRONG IN DECID ING THE REOPENING AS VALID. THEREFORE, WE QUASH THE ORDERS OF THE AUTHORITIES BELOW ON THIS LEGAL ISSUE AND DECIDE THE SAME IN FAVOR OF THE ASSESSEE. 8. SINCE WE HAVE ALREADY QUASHED THE REASSESSMENT P ROCEEDINGS AS AFORESAID, RAISED IN THE ASSESSEES APPEAL, IN OUR CONSIDERED OPINION, THERE IS NO NEED TO ADJUDICATE THE ISSUES ON MERITS. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STAND ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 02/06/2016. SD/- SD/- [O.P. KANT] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 02/06/2016 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES